3 Key Benefits of Having a Business Bank Account
Do you run your own business? If so, you may already have a bank account set up specifically for your company’s needs. However, if you don’t yet have one, it can be hard to decide which account to go with and which features are the most important to you. The key thing to remember when deciding on what kind of business bank account to open is that there’s no right answer; it all depends on what kind of financial goals your company has, what kind of regulatory requirements are mandated by your industry and any other factors that may be unique to your business and its location.
Why do I need a separate account?
Business bank accounts offer businesses and sole proprietors multiple advantages. For example, there are no credit checks or minimum balance requirements, meaning even businesses that are just starting up can qualify for a business bank account. Business bank accounts also give owners more freedom over cash flow management—for example, you might have an option to have funds directly deposited into your business account rather than having to wait until your customers pay you before depositing them into your personal account. In addition, paying bills from business accounts is significantly easier than from personal accounts: instead of writing out numerous checks or logging into various online banking services, you can often make one simple payment through your financial institution’s website—and setting up automatic payments is also possible. There are several additional advantages to having a business bank account, but many of them can be summed up in one statement: it makes your life easier. With separate accounts for both your personal and business expenses, you'll never have to worry about making costly mistakes because you confused your two separate financial entities. A good rule to follow is that if it's not explicitly for business or personal reasons, then it should only go into one account. For example, if you pick up lunch with friends at a restaurant, don't pay with cash from your business account—instead, use your own money and keep those transactions separate so there's no confusion down the line. Another reason to keep business and personal expenses separate is to avoid penalties. Keeping your finances organized is vital for any small business, but it’s even more important if you have a business bank account. Business bank accounts are often opened as sole proprietorships, which means that if you accidentally deposit personal funds into your business account—for example, by mistake or forgetting which account you used at an ATM—you could be penalized by having your account closed or even audited. Moreover, if you're ever audited by tax authorities because they suspect you haven't paid enough taxes on income related to your small business, being able to produce clear records showing all of your expenditures will help make sure there are no mistakes made in calculating how much tax you owe.
What if I don't have my own company?
If you don’t own your own business, chances are someone else does. As an employee, though, you still have to pay taxes on your income and it’s essential that you set up a business bank account for yourself. This way, all of your company’s income will be recorded in one place and there won't be any messy confusion about how much money has been taxed. In short: setting up a business bank account will make sure that everyone pays their fair share in taxes. When it comes to managing your finances as an employee, there is no substitute for self-control and organization; starting off by opening a business bank account is simply one step towards achieving these goals. Finally, if you’re self-employed, it can be difficult to make sure that all your income and expenses are reported correctly. As a sole proprietor, you’ll need to include all of your business’s income and expenses on your personal tax return. This can result in extra work for both you and your accountant—and it may even lead to mistakes or errors. By contrast, if you open up a business bank account right off the bat and transfer all payments into it instead of having them go through your personal bank account, there will be less work to do at tax time because everything has been recorded clearly from day one. Starting up your own business or finding work as an employee? Starting up your own business or finding work as an employee? Regardless of whether you’re an entrepreneur or an employee, managing your personal finances is all about organization and self-control. A business bank account can help you achieve both goals: by clearly separating your income from different sources into different accounts, it makes it much easier for you to make informed financial decisions about spending and saving.
What are the benefits?
Keep Your Money Safe: It’s always wise to keep business and personal funds separate. A business bank account is a great way to keep your finances safe and secure from mistakes like theft or fraud (which are surprisingly common). When you have money in your business account, it doesn’t mean that you can use it for personal expenses, which will help protect you from accidentally spending on things that should be left out of your budget. You can also avoid charge-backs—those pesky situations when clients or customers ask their credit card companies to refund them because they think they were charged twice. By keeping all of your money in one spot, it’s much easier to prevent these kinds of things from happening. You Can More Easily Invoice and Collect from Clients: Invoices aren’t always welcomed by clients, but they do have their place. A business bank account is much more convenient when it comes to sending out invoices and collecting payments since you can just transfer money between your personal and business accounts with one simple click. A business account is also where you should keep money you’re owed so that when you need to collect payment, it will be there waiting for you. All payments are recorded and easily searchable, which makes for quick record keeping during tax season. You’ll Be Able to Purchase Business Equipment and Supplies: Need to purchase a new printer or office chair? One advantage of having your business finances set up as one complete system is that it will be much easier for you to buy equipment or supplies for your office. Any purchases can go directly from your business bank account onto your business credit card, and voilà!
